A Trade A Day: Carvana

StatsEdgeTrading | Michael Nauss CMT

Today's Focus: Carvana (CVNA)

Carvana, a car company in the U.S., has been on an incredible journey. Once considered nearly bankrupt, trading around $1 per share, it has experienced a dramatic turnaround. Here’s a detailed look at why Carvana is on my radar:

1. Short Float:

• The short float remains high at 22%, indicating that many traders are betting against it. This could lead to a significant short squeeze if the stock starts to move up.

2. Algorithmic Insight:

• One of my pullback algorithms highlighted this level, identifying a statistically significant area for a potential reversal. This area also coincides with a prior breakout level, adding to its importance.

3. Technical Pattern:

• The chart is forming a cup and handle pattern. Despite a rough trading day today, I’m looking for a break above the downtrend line to signal strength.

4. Trade Plan:

• Entry: Break above the downtrend line.

• Stop Loss: Placed just below the recent lows to manage risk.

• Target: If the stock moves higher and shorts begin to cover, we could see another substantial rally.

Chart Analysis

• Monthly Chart: Shows the dramatic recovery from near bankruptcy.

• Daily Chart: Highlights the cup and handle pattern and the pullback to the significant level identified by my algorithm.

Summary

Carvana presents an exciting opportunity with a potential breakout on the horizon. The high short float and technical setup suggest that a significant move could be imminent. As always, this is not investment advice, just my personal trade idea for tomorrow.

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